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On February 10, the Council of the European Union published a press release stating that agreement had been reached with the European Parliament regarding the Fourth Money Laundering Directive (MLD4) and the proposed revised Wire Transfer Regulation (WTR).

MLD4 has an extended scope and introduces due diligence requirements for a greater number of traders by lowering the threshold required for anti-money laundering steps from €15,000 to €10,000.

The agreement between the Council and the European Parliament means that MLD4 and WTR will go to second reading and can now be adopted. Member States will have two years to transpose the Directive into national law; the Regulation will be directly applicable. Press Release.

On November 24, the Council of the European Union published a note (dated November 8, 2013) from the Council Presidency to Council Delegations which includes a UK issues paper on the fourth Money Laundering Directive (MLD4). The issues paper states that the UK welcomes MLD4, but notes certain points for discussion. In particular, the UK highlights the issue of beneficial ownerships of companies and misuse of trusts.

The UK suggests that central registries of company beneficial ownership would help to break through corporate secrecy and reveal who truly owns companies. To further this aim, the UK has pledged to make the UK’s central registry of company beneficial ownership publically accessible. The UK is also taking part in an automatic information exchange pilot with France, Italy, Spain and Germany in order to tackle tax evasion and the use of trusts for illegal purposes.

According to an EU press release, these issues were discussed at the November 2013 ECOFIN conference. Note. Press Release.

On October 15, the Council of the European Union announced that it had voted to adopt the proposed Regulation setting up single supervisory mechanism (SSM) legislation.

Under this Regulation, the ECB will supervise banks in EU member states which participate in the European banking union, while certain other functions would be given to competent national authorities of participant member states.

The European Parliament previously voted to adopt the SSM proposals on September 12. The UK Prime Minister has stated that the UK will not participate in the SSM. Announcement.

Having conducted the review, the European Commission concluded that the following issues would be of most relevance in a future revision of FICOD:

the criteria by which a conglomerate is defined and identified;

the criteria by which the parent entity ultimately responsible for meeting group-wide requirements is identified; and

the strengthening of enforcement in respect of the ultimately responsible parent entity.

The European Commission does not propose that FICOD should be amended in 2013. However, FICOD will remain under constant review in order to identify a more appropriate time for amending legislation to be introduced.

On May 21, the Council of the European Union agreed on a draft proposal that would introduce a mandatory rotation rule requiring issuers who pay credit rating agencies to rate their structured finance products with underlying resecuritized assets to switch to a different credit rating agency every four years. The proposal would also require issuers to engage at least two different credit rating agencies to rate structured finance products. The mandatory rotation would not apply for structured finance products rated by small credit rating agencies, or to issuers employing at least four credit rating agencies each rating over 10% of the total number of outstanding rated structured finance products. EU Release.

On May 27, the Council of the European Union adopted a directive to establish common requirements for the authorization and supervision of alternative investment fund managers (AIFM) and provide a coherent approach to risk management and the impact thereof on investors and markets in the European Union (EU). Key features of the directive include: (i) minimum capital requirements; (ii) requiring an AIFM to appoint independent depositories to ensure that a fund’s assets are appropriately protected; (iii) authorizing member states to establish leverage limits and requiring AIFM using leverage on a systematic basis to disclose aggregate leverage to their member state regulatory authority; (iv) authorization requirements for non-EU funds, managed by either EU AIFM or AIFM based outside of the EU; and (v) authorizing member states to exempt AIFM from compliance with the directive, though not from minimum registration and reporting requirements, if they have managed assets below €100 million, if they use leverage, or below €500 million, if they do not. Publication in the Official Journal is expected in mid-June. Council Press Release.

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